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Multinational Business Enterprises

A New Category of International Organizations (Part #1)


Introduction
Definition of "Multinational"
Possible criteria
Sources of information and problems in establishing a list
Analysis of sources
Comment on survey
Comment on list
Conclusions
References

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Report originally published in Yearbook of International Organizations, 12th ed, 1968-69, pp. 1189-1214, with the detailed report, including the survey data on which this article is based. The report included a list of 600 multinational business enterprises. Tables separate. [Version française abregée]. Report also published in International Associations, 1968, 1, pp. 1-11, without tables [PDF version]

Introduction

The editors of the Yearbook of International Organizations have, in previous editions, restricted their attention to non-profit international organizations, whether governmental or non-governmental.

Nearly all intergovernmental organizations are non-profit but the few exceptions have been included in previous editions of the Yearbook to ensure that all intergovernmental organizations were listed. These include such bodies as Eurochemic and Eurofima.

There are many non-governmental organizations which, although they do not have profit as the main aim, nevertheless operate in order to facilitate profit maximization by their members. Most of these are in the commercial section of the Yearbook classified list.

The distinction between governmental and non-governmental organizations as defined by the Economic and Social Council of the United Nations, does not differentiate between profit and non-profit international non-govern- mental organizations. In practice however the non-governmental organizations accepted into consultative status with the United Nations have all been non-profit organizations.

Since the 1966-1967 edition of the Yearbook and particularly during the first six months of 1968, there has been considerable interest in ' multinational ' or ' transnational ' business enterprises and corporations. Articles dealing with the characteristics and business polices of world enterprises have however been appearing in the Harvard Business Review and other American publications since the beginning of the 1950s. Studies of the definition and classification of international organizations have stressed the need to include as a separate category the largely ignored group of international profit-making organizations. These would then constitute a third major group of organizations on the international scene, together with international governmental and non-governmental, non-profit organizations.

It must be pointed out that the decision to add profit-making organizations to the list of international organizations in this Yearbook implied a fundamental assumption which has in fact been borne out by research in the United States on organizations in general, namely that corporations and corporate structures bear many if not most of the characteristics of any or all other kinds of organizations. In addition it has been argued that as corporations recognize the effects of their policies on the well-being of society, which is important for their survival, their decisions are governed less by straight-forward profit maximization and more by objectives which combine long-term profits with improvement in the general social welfare. This approximates the decision-making problem experienced in government agencies.

Apart from a few isolated studies on the classification of international organizations in general, the main interest in this ' new ' category has come from the field of international economics and business administration. This interest has been stimulated by the estimate that within the next decade 75 % of the world's productive capacity will be controlled by a small group of 300 multinational corporations. This has led to the suggestion that these organizations can become an instrument of great utility for the general progress of human welfare - a progress founded on the profit motive as the basis of a free market economy.

The International Chamber of Commerce has recently created a ' Special Committee on the Transnational Corporation ' of which the first meeting was held on March 16th, 1968. The purpose of the Committee is to undertake a study in depth of the increasing influence of the multinational corporation and to establish recommendations for governments and business circles. It is hoped in this way to aid the multinational corporation, of whatever country of origin, to fulfil its role in the economic development of countries in which it is active. The Committee will formulate its conclusions on the basis of a report by American economist, Dr Sidney Rolfe.

A comprehensive study of the importance of the multinational corporation has been in progress at the Harvard Graduate School of Business for some years under Prof Raymond Vernon. The study is specifically concerned with manufacturing organizations listed in ' The 500 Largest U.S. Industrial Corporations ' (' Fortune ', 1934 and 1965) with manufacturing subsidiaries in 6 foreign countries.

The published studies have not yet produced criteria which could be used to evaluate any business enterprise in order to establish a list of multinational corporations. Criteria have been discussed but only isolated examples of organizations fulfilling them have been cited. There has been a tendency to restrict attention to very large multi- national manufacturing organizations because of their considerable economic importance. Little attention has been given to economically less important profit organizations which might in fact be more ' international ', whether they are industrial, commercial or service enterprises. There are, for example, international accounting, engineering, advertising and employment firms.

The UAI after consultation with the International Chamber of Commerce, has undertaken to explore another aspect of this question. The UAI is primarily interested in making available as soon as possible details on all multinational corporations as international bodies, in the same way as is done for intergovernmental and international non-profit non-governmental organizations. In order to do this, criteria of ' multinationaly ' have to be developed which are sufficiently general to be applied to all types and sizes of profit corporation. As an aid to the general debate on this ' new ' category of organizations and to test a few available criteria, it was decided to include in 12th edition of the Yearbook a preliminary list of possible candidates for consideration as multinational corporations.

ook a preliminary list of possible candidates for consideration as multinational corporations.


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